Direct Loan Spotlight

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NOR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE FURNISHING, PERFORMANCE, OR USE OF THIS MATERIAL.

This publication contains material related to the federal student aid programs under Title IV of the Higher Education Act and/or Title VII or Title VIII of the Public Health Service Act. While we believe that the information contained herein is accurate and factual, this publication has not been reviewed or approved by the U.S. Department of Education, the Department of Health and Human Services, or the Department of the Interior.

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Direct Loan

Spotlight

June 3, 2020

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Introductions

• Lissa Powell

 Training Content and Presentation Specialist  NASFAA Training and Regulatory Assistance

• Kochie Vaughan

 Regulatory Specialist

 NASFAA Training and Regulatory Assistance

• Eunice Powell

 Regulatory Specialist

 NASFAA Training and Regulatory Assistance

Today’s Topics

• COVID-19

• Eligibility When Grade Level or Enrollment

Status Changes

• Origination and Disbursement

• Loan Proration

• Annual Student Loan Acknowledgement

• Federal Direct PLUS Loan Program

• Grab Bag

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Poll

Which of the following describes your involvement with Federal Direct Loans? (check all that apply)

 Help students and parents apply for loans

 Receive and review loan requests and related documents  Conduct loan counseling and/or advising

 Monitor NSLDS and/or perform transfer monitoring  Calculate loan eligibility

 Originate loans

 Direct Loan reconciliation

 Update our policies and procedures  Train others about Direct Loans  Other

COVID-19

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COVID-19 and Interest Accrual

Will payments and interest be suspended on

parent PLUS Loans due to COVID-19?

• 0% interest rate applies to loans held by ED



Defaulted and nondefaulted Direct Loans



Defaulted and nondefaulted FFEL Program Loans



Defaulted and nondefaulted Federal Perkins Loans



Defaulted HEAL Loans

• March 13 – September 30

COVID-19 and PSLF

Will suspended payments count toward Public

Service Loan Forgiveness (PSLF)?

• Yes, if you work full-time for a qualifying

employer during the suspension (March 13 –

September 30)

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COVID-19 and Loan Rehabilitation

Will loan payments that are suspended due to

coronavirus count toward loan rehabilitation?

• Yes

• Suspended payments count as if actual

payment was made

• Does not count toward satisfactory repayment

arrangements to clear a defaulted loan

COVID-19 and Loan Repayment

For borrowers who enter their grace period

during the suspension period, will their grace

period be extended?

• No, grace period would begin as normal

• Unless loans were scheduled to enter

repayment prior to September 30, suspension

period would not apply

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COVID-19 and Cohort Default Rates

Due to Coronavirus, will ED extend the deadline

for cohort default rate appeals?

• Appeals for fiscal year 2017 CDRs extended

until June 30, 2020

• April 23, 2020 Electronic Announcement

• If deadline is further extended, NASFAA will

update the AskRegs Knowledgebase

Eligibility When Grade Level or

Enrollment Status Changes

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Enrollment Status Changes

Scenario

• Crystal is second-year undergraduate

• Registered for 14 credit hours prior to fall term

• School disburses 10 days prior to start of payment

period

• Disbursed Direct Loan on August 18

• On August 20, Crystal dropped classes and is

only now scheduled to attend 4 credit hours

Do we have to return the loan funds since she is

now enrolled less than half time?

Quick Quiz—Enrollment Status

Changes

Do we have to return loan funds since she

is now enrolled less than half time?



Yes



No



I’m not sure

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Enrollment Status Changes

Do we have to return the loan funds since she is

now enrolled less than half time?

• No

• There is no regulatory requirement for schools to

recalculate Direct Loan eligibility for enrollment

status changes, unless the student does not

begin attendance in any classes for a

term/payment period within the loan period

• As long as the school verifies that the student was

enrolled at least half time at the time of

disbursement, she remains eligible for the funds

even if she subsequently drops below half time

Enrollment Status Changes

• The same rules apply for payment periods

with modules

• As long as at the time of disbursement the

student was registered at least half time in any

combination of modules within the period, the

student keeps the loan funds even if she does

not attend a later module in the period

16-week term

8-week module 1—Enrolled for 4 credit hours

8-week module 2—Enrolled for 4 credit hours

Disbursement for entire period

Drops module 2, but keeps loan funds

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Academic Program Changes

Scenario

• 26-year old student attended another university

during the fall semester, pursuing a graduate

degree

• Borrowed $10,250 in Direct Unsubsidized Loan

funds

• He transferred to our school for the spring

semester, pursuing a second bachelor’s degree

during the same academic year

• Classified as a 5

th

_{year student at our school}

How do we determine the maximum he may borrow

for the rest of the academic year?

Quick Quiz—Academic Program

Changes

How do we determine the maximum he may

borrow for the rest of the academic year?



The graduate-level loan is not taken into

consideration. He can borrow the full annual loan

limit of $12,500.



He can only borrow $2,250, the difference

between the graduate-level loan and the annual

loan limit for a junior/senior.



The undergraduate loan limit applies, but the

total amount received for the academic year

cannot exceed the graduate level limit. He can

borrow up to $10,250.



I’m not sure.

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Academic Program Changes

How do we determine the maximum he may

borrow for the rest of the academic year?

• He may borrow $10,250

• The undergraduate annual loan limit applies,

and amounts borrowed at the graduate level

for the fall do not count against the

undergraduate loan limit

• However, the total amount awarded for the

academic year may not exceed the higher

annual loan limit

Academic Program Changes

Annual Loan Limit $12,500 22

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Academic Program Changes

Loan Origination and Disbursement

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Loan Origination

Scenario

• School realized it failed to originate a loan for a

student before a loan period ended

• Student submitted email request to accept loan

funds but email was stuck in spam filter at school

Can the loan be originated now that the loan period

has ended since it was not the student’s fault?

Quick Quiz—Loan Origination

Can the loan be originated now that the loan

period has ended?



Yes. Because the student requested the

funds before the period ended, the student

cannot be penalized.



Yes. You may still originate a loan after the

end of the loan period.



No. Loans may not be originated after the

end of a loan period.



I’m not sure.

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Loan Origination

No. Loans may not be originated after the end of

a loan period.

• Late disbursement rules apply



The loan must be originated prior to the student

ceasing half-time enrollment

• It does not matter why the loan was not

originated

Loan Origination

Scenario

• Kyler is a 20-year old, second-year

undergraduate

• Transferred at the beginning of summer term

• Attended another school during the fall and

spring, but did not borrow Direct Loan funds

• Summer term cost of attendance = $12,000

• Kyler is only eligible for Direct Loans

Can we award the entire annual loan limit during

the summer term if she will be enrolled at least

half time?

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Quick Quiz—Loan Origination

Can we award the entire annual loan limit during

the summer term if she will be enrolled at least

half time?



Yes. If Kyler is eligible for the full annual loan

limit, you cannot limit the amount she

borrows.



No. The loan period is shorter than the

academic year, so she can receive only a

portion of the annual loan limit.



I’m not sure.

Loan Origination

Yes. If Kyler is eligible for the full annual loan

limit, you cannot limit the amount she borrows.

• Loan period must reflect the single term

• May require two disbursements

• COA

EFC

EFA

Max

Sub

COA

EFA

_Unsub

Max

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Loan Origination

Scenario:

• Marcus is planning to attend class on campus

in the fall and then take advantage of a

study-abroad opportunity for the spring term

• The costs associated with the two terms are

going to be very different

• We were told we must originate loans with

equal disbursements

How can we accurately originate a loan for

Marcus?

Quick Quiz—Loan Origination

How can we accurately originate a loan for Marcus?

(check all that apply)



You may use two separate loans; one for fall and

one for spring.



You may use two separate loans; one for

fall/spring and one for the difference in cost for

the spring.



You may originate a loan in equal amounts but

remind Marcus that some of the fall

disbursement should be saved for the spring.



I’m not sure.

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Loan Origination

You may use two separate loans; one for fall and

one for spring.

• COA, EFC, and EFA based on single term

• May require two disbursements of each loan

OR

You may use two separate loans; one for

fall/spring and one for the difference in cost for

the spring.

• COA, EFC, and EFA based on loan period

• May require two disbursements of spring-only

loan

Loan Proration

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Loan Proration

Scenario:

• When an undergraduate student only needs to

attend one more term to finish their program,

we have been offering the student one-half of

their annual loan limit

• An auditor recently told us that we have been

doing this incorrectly

How should we be calculating the student’s

Direct Loan eligibility?

Quick Quiz—Loan Proration

How should we be calculating the student’s

Direct Loan eligibility?



If the student is only enrolled for one half of the

school year, they can only receive one half of the

annual loan limit.



The student can receive the whole annual loan

limit in one term.



The student’s eligibility must be determined

based on the number of hours needed to

complete the program.



I’m not sure.

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Loan Proration

The student’s eligibility must be determined

based on the number of hours needed to

complete the program.

• Compare the number of hours the student will

be enrolled with the number of hours in the

academic year

• Determine maximum subsidized and

unsubsidized loan eligibility

Loan Proration

Calculate maximum base eligibility:

8 hours

24 hours

1/3 or

0.33

0.33 $5,500

$1,833

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Loan Proration

Calculate maximum additional unsubsidized

eligibility:

0.33 $2,000

$660

Maximum base eligibility $1,833 Maximum add’l unsubsidized eligibility $660

Loan Proration

Scenario:

• Laney will complete her undergraduate degree

in December and plans to begin graduate

work in January

Do we have to prorate her undergraduate loan

when she’s starting a graduate program in the

same academic year?

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Quick Quiz—Loan Proration

Do we have to prorate her undergraduate loan

when she’s starting a graduate program in the

same academic year?



No, not if both programs are at the same school.



No, not if the student will be enrolled for the

entire academic year.



Yes, because proration is required when a

student’s final period of study is less than one

academic year in length.



I’m not sure.

Loan Proration

Yes, because proration is required when an

undergraduate student’s final period of study is

less than one academic year in length.

• School may process the spring loan using the

graduate level COA and EFC

• Spring loan based on graduate annual loan

limits

• Loan proration never required for graduate

students

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Loan Proration

Scenario

• Darius was scheduled to graduate in December

• School prorated his loan eligibility

• After disbursement we discovered that he has two

additional classes (8 credit hours) needed to

graduate

• Will not be graduating until the end of the spring

term

What do we do when a student’s end date changes

after loans have been prorated?

Quick Quiz—Loan Proration

What do we do when a student’s end date

changes after loans have been prorated?



Return loan funds and re-do the loan

origination for the entire academic year.



Offer the remaining annual loan limit for the

spring term.



Do not offer the student additional loan funds

since the loan was supposed to be for the

final period of study.



I’m not sure.

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Loan Proration

Offer the remaining annual loan limit for the

spring term.

• Student may now receive full annual loan limit

* If loan had not yet disbursed, school could

re-package student without prorating loans and

originate loan with adjusted loan period.

Loan Proration

Scenario:

• Tyler is a 5

th

_{-year student who has borrowed}

$29,000 of his aggregate loan limit, with

$22,000 in subsidized loans

• Tyler was scheduled to graduate in the spring,

but realized he will need to return in the fall

term to complete 8 credits

I know we need to prorate his loans, but how

does the aggregate limit affect his eligibility?

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Loan Proration

*Proration determines maximum eligibility. In

some cases, student is not eligible for the

maximum amount.

Calculate maximum base eligibility:

8 hours

24 hours

1/3 or

0.33

0.33 $5,500

$1,833

Loan Proration

Calculate maximum unsubsidized eligibility:

0.33 $2,000

$660

Maximum subsidized eligibility $1,000 Maximum unsubsidized eligibility $1,000

$1,833 + $660 = $2,493 Total Prorated Eligibility

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Loan Proration

Scenario

• Olivia needs 8 credits to complete program

• Courses are only offered in the spring term

• Olivia will not attend fall term and will return

for spring

Do we have to prorate loans for the spring term

in this instance?

Quick Quiz—Loan Proration

Do we have to prorate loans when the student is

attending only the spring term?



Yes. Her period of enrollment is shorter than

an academic year.



No. Because it is the spring term, no

proration is required.



I’m not sure.

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Loan Proration

Yes. Her period of enrollment is shorter than an

academic year.

8 hours 24 hours 1/3 or 0.33 0.33 $5,500 $1,833 0.33 $2,000 $660

Maximum base eligibility

Maximum add’l unsub eligibility

Annual Student Loan

Acknowledgement

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Annual Student Loan

Acknowledgement

What do we need to know about the new Annual

Student Loan Acknowledgement?

• March 27,2020 Electronic Announcement

• ASLA requirement delayed until 2021-22

• Requirement applies to all Direct Loan

borrowers—including parent PLUS Loan

borrowers

• Must be completed annually, prior to

disbursement of loan

Annual Student Loan

Acknowledgement

studentaid.gov

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Direct PLUS Loan Program

Parent PLUS Loan

Scenario:

• Gerald’s mother was denied a parent PLUS

Loan and he received additional Direct

Unsubsidized Loan funds

• We just received an approved application from

Gerald’s other parent

Can we originate a PLUS Loan and do we have

to return the additional unsubsidized loan funds

if we do?

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Quick Quiz—Parent PLUS Loan

Can we originate a PLUS Loan and do we have to

return the additional unsubsidized loan funds if we

do?



Because the student has already received

additional unsubsidized loan funds, you cannot

originate a PLUS Loan for the same period.



You may originate the PLUS Loan only if you

return the additional unsubsidized loan funds he

already received.



You may originate the PLUS Loan only if you

cancel any additional unsubsidized loan funds

not yet disbursed.



I’m not sure.

Parent PLUS Loan

You may originate the PLUS Loan only if you

cancel any additional unsubsidized loan funds

not yet disbursed.

• Any amount of unsubsidized loan funds

already disbursed does not need to be

returned

• The amount of disbursed unsubsidized loan

funds must be counted as EFA when

determining PLUS amount

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Parent PLUS Loan

Scenario:

• Aiden’s father was not approved for a parent

PLUS Loan but indicated that he would pursue

an endorser

• By the time we were notified that the endorser

had been obtained, Aiden was no longer

enrolled at least half time

Can we make a late disbursement in this

situation?

Quick Quiz—Parent PLUS Loan

Can we make a late disbursement if the PLUS

endorser is obtained after the student ceases to be

enrolled at least half time?



No. Once the student is no longer enrolled half

time, you cannot accept the endorser’s

information.



Yes. As long as the loan was originated (not just

accepted) before the student dropped below half

time, the borrower still can obtain an endorser in

time for the late disbursement to be made.



I’m not sure.

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Parent PLUS Loan

Yes. As long as the loan was originated (not just

accepted) before the student dropped below half

time, the borrower still can obtain an endorser in

time for the late disbursement to be made.

Enrolled No longer enrolled*

180 days (if valid SAR received by annual processing deadline)

Direct Loan and/or TEACH Grant originated

MPN and/or entrance counseling may be completed

Parent PLUS Loan

Scenario:

• Eva transferred to our school mid-year

• Her mother informed us that she had applied

but was denied a parent PLUS Loan at Eva’s

previous school

Can we use that denial to award additional

unsubsidized loan funds?

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Quick Quiz—Parent PLUS Loan

Can a parent PLUS denial from another school

be used to offer a Direct Unsubsidized Loan?



No. The school must obtain its own denial

before offering the additional funds.



Yes. As long as it is for the same academic

year, the denial from another school can be

used to offer additional funds.



I’m not sure.

Parent PLUS Loan

Yes. As long as it is for the same academic year,

the denial from another school can be used to

offer additional funds.

• PLUS denial is not school-specific

• Must be for same academic year

• 180-day validity of credit check not applicable

• Document student’s file using information from

COD

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Grab Bag

Total Permanent Disability

Scenario:

• We have an incoming student who has a

permanent, irreversible disability

• She has not received loans before (no discharges

of loans), and I don’t believe her physician will

sign the form stating she can work

Does a permanent disability prevent a student from

borrowing if she has never borrowed a Title IV loan

before?

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Quick Quiz—Permanent Disability

Does a permanent disability prevent a

student from borrowing if she has never

borrowed a Title IV loan before?



Yes



No



I’m not sure

Total Permanent Disability

No. Total and permanent disability only affects a

student’s ability to borrow when there has been

a previously discharged Title IV loan.

• Student could obtain loans, if general eligibility

criteria met

• School could choose to use PJ to reduce or

deny student’s eligibility for loans



Consult with school’s legal counsel

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Master Promissory Note

Scenario:

• We have siblings enrolled at our school

• Their father will be borrowing a parent PLUS

Loan for each child this year

Must a parent complete a separate PLUS MPN

for each dependent student?

Quick Quiz—MPN

Must a parent complete a separate PLUS

MPN for each dependent student?



Yes, only if the siblings are at different schools.



Yes, regardless of whether the siblings are at

different schools.



No. The parent is the borrower, so only one MPN

is necessary.



I’m not sure.

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Master Promissory Note

Yes, regardless of whether the siblings are at

different schools.

• A separate MPN is needed for each

dependent student

Direct Subsidized Loan Limit

Scenario:

• Elton borrowed Direct Loans in excess of

150% of his maximum eligibility period for

Direct Subsidized loans

• Elton’s mother applied for, but was denied, a

parent PLUS Loan

Can Elton now receive additional Direct

Unsubsidized Loan funds?

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Quick Quiz—Direct Subsidized Loan

Limit

Can Elton now receive additional Direct

Unsubsidized Loan funds?



Yes



No



I’m not sure

Direct Subsidized Loan Limit

Yes.

• As long as student has not reached the

aggregate loan limit and remains otherwise

eligible

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Academic Level Limit for Academic Year (Subsidized and Unsubsidized

Direct Loans)

for Dependent Students Whose Parents Can Borrow

PLUS Independent Students and Dependent Students Whose Parents Cannot Borrow PLUS First-Year Undergraduate $3,500 $2,000 $6,000 Second-Year Undergraduate $4,500 $2,000 $6,000

Third-Year and Beyond

Undergraduate $5,500 $2,000 $7,000 Preparatory Coursework for Enrollment in an Undergraduate Program $2,625 $6,000 Preparatory Coursework for Enrollment in a Graduate/Professional Program $5,500 $7,000

Coursework for Teacher

Certification/Credential $5,500 $7,000

Graduate/Professional $0 $20,500

Prorated Loan Limits: Applicable to undergraduates enrolled in program less than an academic year (AY)

Annual loan limit for grade level, multiplied by the lesser of: # of weeks in program

# of weeks in AY

or

# of credit/clock hours in which student will enroll # of credit/clock hours in AY

Prorated Loan Limits: Applicable to undergraduates enrolled in remaining period of enrollment less than an AY (when program length is one AY or longer)

Annual loan limit for grade level, multiplied by:

# of credit/clock hours in which student will enroll # of credit/clock hours in AY

Note: If a financial aid administrator exercised professional judgment authority for a dependent student to offer only

unsubsidized loan funds because the student’s parents no longer financially support the student, will not support the student in the future, and refuse to complete the Free Application for Federal Student Aid (FAFSA), eligibility is limited to

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PLUS _{Borrow PLUS} Health Professions:

Graduate in Public Health, Masters or Doctoral Degree in Health Administration, Doctoral Degree in Clinical Psychology, Doctor of Pharmacy or Chiropractic

$0

$20,500 + $12,500*

(for 9-month AY)

$20,500 + $16,667*

(for 12-month AY)

Health Professions: Doctor of Allopathic Medicine, Osteopathic Medicine, Dentistry, Veterinary Medicine, Optometry, Podiatric Medicine, Naturopathic Medicine, or Naturopathy $0 $20,500 + $20,000*

(for 9-month AY)

$20,500 + $26,667*

(for 12-month AY)

PLUS (for parents of dependent undergraduates and graduate/professional students)

Cost of attendance (COA) minus estimated financial assistance (EFA) for loan period (Note: PLUS funds are unsubsidized. Graduate/professional students

must complete the FAFSA and be given an opportunity to receive their maximum eligibility in unsubsidized loan funds first.)

*Increased unsubsidized annual loan limit available for certain health professions students due to phase out of the Health Education Assistance Loan (HEAL) Program. The 9-month increased unsubsidized loan limit must be prorated for programs having an academic year of 10 or 11 months. For additional information, refer to Volume 3 of the FSA

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Academic Level _{Subsidized Borrowing} _Borrowing* (maximum subsidized)

Dependent Undergraduate Whose Parent Can Borrow PLUS $23,000 $31,000 (maximum $23,000 subsidized) Independent Undergraduate and Dependent Undergraduate Whose Parent Cannot Borrow PLUS

$23,000 $57,500

(maximum $23,000 subsidized)

Graduate/Professional $65,500 $138,500

(maximum $65,500 subsidized)

Graduate in Public Health, Masters or Doctoral Degree in Health Administration, Degree in Clinical Psychology, Doctor of Pharmacy or Chiropractic $65,500 $224,000 (maximum $65,500 subsidized) Doctor of Allopathic Medicine, Osteopathic Medicine, Dentistry, Veterinary Medicine, Optometry, Podiatric Medicine, Naturopathic Medicine, or Naturopathy $65,500 $224,000 (maximum $65,500 subsidized)

PLUS (for parents of dependent undergraduates and for graduate/professional students)

No aggregate limits

*The amounts in the “Aggregate Combined Loan Limit: Subsidized and Unsubsidized Borrowing” column represent the

total amount of Direct Loans that may be borrowed for the student’s current program of study. If the student later enrolls in a program with a lower aggregate combined loan limit, the student reverts to the aggregate combined loan limit applicable to his or her new program. The same principle applies if the amount of a student’s eligibility for the additional unsubsidized loan limits changes due to a change in dependency status from independent to dependent or a change in the inability of a dependent student’s parent to borrow a PLUS. That is, the amounts under the increased additional unsubsidized loan limit do not count toward the new aggregate combined loan limit.

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 The final period of enrollment for a program of study when the program is greater than or equal to an AY, but the student’s remaining period of enrollment is shorter than an AY.

• Proration does not apply to graduate or professional degree programs, preparatory coursework, teacher certification programs, or PLUS.

• Prorated loan limits are determined by answering the following questions:

 Is the student enrolled in either a program that is shorter than an AY or a remaining period of enrollment?

 If the program is an AY or longer, is the remaining period of enrollment shorter than an AY?

 What portion of the AY remains to be completed?

 What portion of the annual loan limit may the student borrow for the remaining period of enrollment?

Programs Shorter Than an Academic Year

• Proration is required if credit or clock hours and/or number of weeks do not meet the program’s AY definition, as defined by the school in accordance with statutory requirements.

Programs Equal to or Greater Than an Academic Year

• A school must establish whether the student is in a remaining period of enrollment and whether that remaining period is shorter than an AY.

 Proration does not automatically apply because the student is enrolled in a period less than an AY. The student also must be enrolled in his or her final or remaining period of enrollment.

 A remaining period of enrollment is the final portion needed to complete program requirements.

 Proration is required if the remaining portion is shorter than an AY.

• The expected program completion date should be based on the best information available at the time of loan origination.

• The determination of whether a remaining period of enrollment is shorter than an AY is based on the program’s structure.

 Credit-Hour Standard-Term Programs and Nonstandard-Term Programs Having Substantially Equal Terms with No Term Less Than Nine Weeks:

♦ The number of terms in the period of enrollment is compared to the number of terms in the SAY or BBAY.

♦ The remaining period of enrollment is shorter than an AY if it consists of fewer terms than in the program’s SAY or BBAY.

 Clock-Hour Programs, Nonterm Credit-Hour Programs, and Nonstandard-Term Credit-Hour Programs with Terms That Are Not Substantially Equal or with a Term Less Than Nine Weeks:

♦ The remaining period of enrollment is shorter than an AY if it has fewer clock or credit hours than in the program’s definition of an AY.

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• Determine if a remaining period of enrollment is less than a full academic year; and

• Prorate annual loan limits for students in programs that are at least one academic year in length but with a remaining period of enrollment less than a full academic year.

• NOTE: Confirm if student is a first-time borrower and the student has remaining subsidized loan eligibility, per the 150 percent Direct Subsidized Loan limit.

1) Is the student enrolled in either a program that is shorter than an academic year or a remaining period of enrollment? (check one)



Yes, the program is shorter than an academic year. Proration is required. Skip question 2 and go to question 3.



Yes, the student will graduate or complete the program at the end of the period of enrollment. Proration may be required. Continue with question 2.



No, the program is neither shorter than an academic year, nor will the student graduate or complete the program at the end of the period of enrollment. Proration is not required; full academic year loan limits apply. Do not continue the worksheet.

2) If the program is an academic year or longer, is the student’s remaining period of enrollment shorter than an academic year?

Complete questions a through f, as appropriate, to determine if proration is required using the chart. Credit-Hour Programs Offered in Standard Terms or in Nonstandard Terms

Having Substantially Equal Terms and No Term Less Than Nine Weeks Complete a and b Clock-Hour Programs, Nonterm Credit-Hour Programs, and Nonstandard

Term Credit-Hour Programs Having Terms That Are Not Substantially Equal or any Term Less Than Nine Weeks

Complete c, d, e, and f

a. Number of terms in the remaining period of enrollment = __________

b. Number of terms in the school’s scheduled academic year or borrower-based

academic year = __________

c. Number of credit/clock hours in the remaining period of enrollment = __________

d. Number of credit/clock hours in an academic year = __________

e. Number of weeks the remaining period of enrollment = __________

f. Number of weeks in an academic year = __________

Program Type Conditions Requiring Proration

Credit-Hour Programs Offered in Standard Terms or in Nonstandard Terms Having Substantially Equal Terms and No Term Less Than Nine Weeks:

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hours in academic year _______ equals ________ (use fraction).

If proration is required due to a remaining period of enrollment less than a full academic year, skip questions 3b and 3c, and go to question 4.

If proration is required due to a program being less than a full academic year, complete questions 3b and 3c, then go to question 4.

b. Number of weeks remaining to complete program ________ divided by number of weeks in the academic year _______ equals ________ (use fraction).

c. Lesser of 3a or 3b is ________ (use fraction).

4) What portion of the annual loan limit may the student borrow for the period of enrollment?

To determine the prorated annual loan limit, use the appropriate annual loan limit for the student’s grade level multiplied by the applicable fraction from question 3.

If proration is required due to a remaining period of enrollment less than a full academic year, calculate the prorated annual loan limit as:

Annual Loan Limit _{From 3(a)}Fraction Prorated Annual _{Loan Limit} Base $_________ x ______ = $__________ Additional

Unsubsidized $_________ x ______ = $__________

Total $__________

If proration is required due to a program being less than a full academic year, calculate the prorated annual loan limit as:

Annual Loan Limit _{From 3(c)}Fraction Prorated Annual _{Loan Limit} Base $_________ x ______ = $__________ Additional

Unsubsidized $_________ x ______ = $__________

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Direct Loan Counseling - Entrance, Financial Awareness, PLUS Credit, Exit ... 53

Entrance Counseling ... 53

Financial Awareness Counseling ... 53

PLUS Credit Counseling ... 54

Exit Counseling ... 54

FAFSA and Master Promissory Note - Direct Subsidized Loans and Direct Unsubsidized Loans ... 54

FAFSA and Master Promissory Note – Direct PLUS Loans ... 55

Confirmation Process (for subsequent loans) ... 56

Annual Student Loan Acknowledgement ... 56

Origination ... 57

Disclosure Statements ... 57

Disbursement ... 58

Other Important Reminders: ... 59

Reconciliation... 60

Common Record Response Documents ... 61

Unsolicited System-Generated Responses ... 62

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The Direct Loan Program offers four loan types: • Direct Subsidized Loans

• Direct Unsubsidized Loans

• Direct PLUS Loans (for Parents and Graduate/Professional Students) • Direct Consolidation Loans

This document provides a high-level overview of the Direct Loan process and tools available to assist with each part of the process.

Direct Loan Counseling - Entrance, Financial Awareness, PLUS Credit,

Exit

Entrance Counseling

Direct Subsidized Loan and Direct Unsubsidized Loan entrance counseling is only required for

first-time borrowers. Graduate and professional student borrowers who are receiving their first Direct

PLUS Loan must complete entrance counseling that also includes Direct PLUS Loan information.

Note: A borrower who is receiving his or her first Direct Loan is not required to complete entrance

counseling if he or she has previously received the same type of loan through the Federal Family Education Loan (FFEL) Program.

A school has a number of options for meeting the regulatory requirement to ensure that entrance counseling is provided, including:

• Online via the StudentAid.gov website

• In-person sessions, audio-visual presentations, or other online counseling products. As a reminder, if a school uses one of these other options for Direct Loan entrance counseling, it is responsible for ensuring that the counseling meets all federal Direct Loan entrance counseling requirements.

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counseling.

Financial Awareness Counseling is only available online via the StudentAid.gov website.

PLUS Credit Counseling

PLUS Credit Counseling is required for parent and graduate/professional student Direct PLUS Loan applicants who are determined to have an adverse credit history but qualify for a Direct PLUS Loan by obtaining an endorser or documenting extenuating circumstances.

KEY POINT: PLUS Credit Counseling for applicants who are determined to have an adverse credit history is a separate module and does not fulfill the entrance counseling requirement for first-time graduate/professional student Direct PLUS Loan applicants. Depending on a

graduate/professional student’s circumstances, he/she may have to complete both modules.

PLUS Credit Counseling is only available online via the StudentAid.gov website. While the

completion of the new PLUS Credit Counseling is required only for the Direct PLUS Loan applicants identified above, the new PLUS Credit Counseling is also available for all Direct PLUS Loan

applicants to complete on a voluntary basis.

Exit Counseling

A school also has a number of options for meeting the regulatory requirement to ensure exit counseling is provided, including:

• Online via the StudentAid.gov website.

• In-person sessions, audio-visual presentations, or other online counseling products. As with entrance counseling, if a school uses one of the other options for exit counseling, it is

responsible for ensuring that the counseling meets all federal exit counseling requirements.

FAFSA and Master Promissory Note - Direct Subsidized Loans and Direct

Unsubsidized Loans

For Direct Subsidized Loans and Direct Unsubsidized Loans, a borrower must complete: • Free Application for Federal Student Aid (FAFSA®) form

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MPN electronically via the StudentAid.gov website or on paper. Note: Borrowers must be permitted to sign a paper MPN if they choose not to complete the MPN electronically.

FAFSA and Master Promissory Note – Direct PLUS Loans

For Direct PLUS Loans, a borrower must complete:

• FAFSA form (Graduate/professional students only)

• Direct PLUS Loan MPN

• Additional information needed to originate a Direct PLUS Loan (see below)

A school may establish a school-specific process for obtaining Direct PLUS Loan information or it may direct its PLUS borrowers to complete the Federal Direct PLUS Request for Supplemental

Information (Direct PLUS Loan Request) via the StudentAid.gov website.

The advantages to the Direct PLUS Loan Request are:

• A credit check is performed during the Direct PLUS Loan Request process.

• After completing the Direct PLUS Loan Request, borrowers are given the opportunity to complete the Direct PLUS Loan MPN.

• An applicant who is determined to have an adverse credit history after completing a Direct PLUS Loan Request may have an endorser complete a Direct PLUS Loan Endorser

Addendum electronically, initiate the process of appealing the determination of adverse credit, complete PLUS Counseling, or indicate that he or she does not wish to continue pursuing a Direct PLUS Loan.

The MPN is the legal document through which a borrower promises to repay his or her Direct Loan and any accrued interest and fees to the Department. It also explains the terms and conditions of the loan.

A school may offer its borrowers the option of completing a Direct PLUS Loan MPN electronically via the StudentAid.gov website or on paper. Note: Borrowers must be permitted to sign a paper MPN if they choose not to complete the MPN electronically.

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• Active Confirmation – school does not disburse the loan until the borrower accepts the

loan type and amount or requests changes to the loan package.

• Passive Confirmation – school disburses the loan when the borrower is notified of the loan

package. The borrower only needs to take action if he or she is declining the loan or making changes to the type or amount offered.

For Direct Subsidized Loans and Direct Unsubsidized Loans, a school can use either an active or passive confirmation process. For Direct PLUS Loans, a school must use an active confirmation process.

Note: The Direct PLUS Loan Request (discussed above) can be used as a school’s active

confirmation process.

Annual Student Loan Acknowledgement

The “Annual Student Loan Acknowledgement” process (previously referred to as the “Informed Borrowing Confirmation” process) will be implemented in late April 2020 on StudentAid.gov. The new process will allow student and parent borrowers to view how much they currently owe in federal student loans, and to acknowledge that they have seen this amount.

Note: For the 2020–21 Award Year, the process will be available to borrowers, but it will not be

required. For the 2021–22 Award Year, the process must be completed before a borrower can receive the first disbursement of the first loan the borrower receives for a particular award year (starting with loans associated with the 2021–22 Award Year).

The Annual Student Loan Acknowledgement is in addition to the existing MPN confirmation processes that we have approved; it does not require schools to make any changes to their MPN confirmation processes. Further, the Annual Student Loan Acknowledgement also does not replace existing counseling requirements. This means that in addition to completing the Annual Student Loan Acknowledgement, first-time student Direct Loan borrowers must also complete entrance counseling before receiving their first loan disbursement, and Direct PLUS Loan applicants who are determined to have an adverse credit history and qualify for a Direct PLUS Loan by obtaining an endorser or documenting extenuating circumstances must also complete PLUS credit counseling. The Annual Student Loan Acknowledgement is not school-specific. If a borrower completes the process for a loan associated with a particular award year at one school, the borrower will not complete the process for another loan associated with that same award year again, even if he or she receives the other loan at a different school.

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of the Direct PLUS Loan.

Schools will receive information about borrowers’ Annual Student Loan Acknowledgement

completion in several ways, including Common Record responses, Common Record web responses, system-generated responses, COD web, COD edits, COD reports.

Note: While borrowers will see the term “Annual Student Loan Acknowledgement” on

StudentAid.gov and in any borrower-facing materials, schools will see references to “Informed Borrowing Confirmation” on the COD website screens, in the tags for the COD XML schema, and in parts of the COD Technical Reference.

Origination

The origination process informs the Department of who will receive Direct Loan funds, for what period, in what amounts, and on what anticipated dates. The school communicates origination information to the Department via the COD System. The date of loan origination is the date the school creates the electronic loan origination record (see 34 CFR 685.301(a)(6)).

The COD System will process the origination information and send a Common Record Response to the school (message classes: COMREC, CRAA, or CRDL).

Origination information includes: • Student/Borrower information

• Loan information

• Disbursement information (anticipated)

Note: For Direct PLUS Loans, the origination process will initiate a credit check, if there is not one

on file within the past 180 days. Therefore, a school must have the applicant’s authorization to complete a credit check prior to submitting a Direct PLUS Loan origination to the COD System, if the applicant has not previously completed an MPN or Direct PLUS Loan Request. A credit check

authorization is part of both the MPN and Direct PLUS Loan Request processes.

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• For loans greater than $0 and accepted seven days or less before the earliest anticipated disbursement date or after the earliest anticipated disbursement date, the COD System sends the disclosure statement immediately.

• For loans greater than $0 and accepted more than seven days before the earliest anticipated disbursement date, the COD System sends disclosures seven days before the earliest

anticipated disbursement date.

A school has other processing options for processing and printing disclosure statements. It can select these additional options via the COD website’s School Options page.

Notes:

1. To prevent a disclosure statement from going to a borrower who has asked that a loan be cancelled, it is important to reduce the loan to $0 more than seven days before the first anticipated disbursement date.

2. If the origination record has not been submitted to the COD System at the time of disbursement, a school must provide the disclosure statement to the borrower. For subsequent loans, a Plain Language Disclosure (PLD) must also accompany the disclosure statement. Sample disclosure statements and PLDs are available on the IFAP website. 3. The disclosure statement does not fulfill the school’s regulatory requirement to notify the

borrower once each disbursement is made.

A disclosure statement is not sent for disbursement adjustments.

Disbursement

A disbursement record reports the date the funds were disbursed to the borrower by posting funds to the student’s account at the school or paying the borrower directly (via check or other means). A valid MPN must be associated with the loan before the COD System will accept disbursement records. There are three types of disbursement records:

Disbursement Type

Characteristics

Anticipated Disbursements

• Disbursement Release Indicator (DRI) is set to “False” in the Common Record or on the COD website.

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Actual

Disbursements

• Disbursement Release Indicator (DRI) is set to “True” in the Common Record or on the COD website.

• Some schools may submit up to 7 days before the actual disbursement date.

• Must be submitted within 15 days of disbursement. Disbursement

Adjustments

• Corrects or changes previously reported disbursement information. • Must be submitted within 15 days of the adjustment.

A school draws down Direct Loan funds via the G5 website to make disbursements.

Other Important Reminders:

1. Before disbursing funds to borrowers, the disbursing office (for example, the Business Office or Bursar’s Office) should work with the Financial Aid Office to confirm which Direct Loan disbursements are to be made. It is important that these two offices work together to ensure that disbursements and disbursement adjustments are reported timely and

accurately, and to perform the required Direct Loan monthly reconciliation (see following section).

2. A school must notify a borrower of each disbursement in accordance with the requirements described in 34 CFR 668.165(a)(2). As noted earlier, the Department’s disclosure statement does not fulfill this requirement.

3. It is critical that the disbursement date and disbursement amount are reported accurately. Interest accrues from the date of each actual disbursement, so if the date or amount is different than what was previously reported, a correction must be submitted through a disbursement adjustment.

If a borrower requests that all or a portion of the disbursement or loan be cancelled within the regulatory time frames, a disbursement adjustment must be submitted within 15 days of the adjustment.

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• Discrepancies are identified and resolved

• Reasons for remaining cash balances are documented

Direct Loan Reconciliation is a mandatory monthly process, as required under 34 CFR 685.300(b)(5). A school should reconcile all cash (Drawdowns and Refunds of Cash) and disbursement records (Actual Disbursements and Adjustments) with information in the COD System on an ongoing basis.

Direct Loan schools must also complete a final reconciliation to a zero ($0) Ending Cash Balance at the end of their processing year. This should occur within a month or two of the school’s final disbursements but no later than the Program Year Closeout deadline, which is the last processing day in July of the year following the end of the award year.

To assist a school with the reconciliation process, the Department generates a monthly, award year-specific Direct Loan School Account Statement (SAS) and distributes it through a school’s Student Aid Internet Gateway (SAIG) mailbox. The Direct Loan SAS is a monthly statement, similar to a bank statement, which summarizes the school’s processing activity for each month, and provides a record of all detailed transactions (cash and actual disbursement data) processed in the COD System during the reported period. The SAS is the school’s primary tool used in required monthly reconciliation and program year closeout and should be compared to both financial aid and

business office records. This report provides the Department’s official ending cash balance as of the end date of the report, based on data submitted by the school. As such, all schools are required to receive the SAS on a monthly basis until they have officially closed out a program award year. The Direct Loan SAS is available in multiple formats. A school can select its SAS options via the COD website’s SAS Options page.

Additional information on the Direct Loan SAS is available in the COD Technical Reference, Volume VI, Section 8.

In addition, there are additional tools available to assist schools in reconciliation and closeout efforts. These tools are as follows:

• Direct Loan SAS Disbursement Detail On-Demand • Pending Disbursement Listing

• Actual Disbursement List • G5 website and Reports

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• Customer Service Representative/Reconciliation Specialist Assistance

Common Record Response Documents

Once processed by the COD System, origination and disbursement data is either accepted or rejected. The Common Record Response informs a school of the status of its records. The COD System sends one response document for each Common Record document (batch) submitted. The response document is also commonly referred to as an acknowledgement.

For Common Records that are transmitted via the SAIG, the COD System sends the response to a school’s SAIG mailbox.

For data submitted via the COD website, a school has the option to receive a Web Response via its SAIG mailbox or not at all. A school should check with its software provider to determine if the software accepts Web Responses.

In addition, responses provide the school:

• MPN linking information. If the MPN is linked to (associated with) a loan, additional information such as the expiration date is also included in the response.

• Credit Requirements Met status. Direct PLUS Loans must meet one of the following conditions before the loan may be disbursed:

o Borrower has Accepted credit decision status.

o Borrower has a Denied credit decision status, has documented to the satisfaction of the Department that there are extenuating circumstances related to the adverse credit information, and has completed PLUS Counseling.

o Borrower has a Denied credit decision status, has obtained an endorser who does not have an adverse credit history and has completed PLUS Counseling.

• Annual Student Loan Acknowledgement (Informed Borrowing) information.

Additional information about COD System responses and the COD System Reject and Warning Edits can be found in the COD Technical Reference.

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or on paper and is accepted. The responses are sent to the school identified on the MPN. If MPN information changes (for example, the expiration date), the response is sent to any school associated with an MPN (the school identified on the MPN and the school that originated the award linked to the MPN).

• Counseling responses (message class: CREC) – generated when Entrance, Financial

Awareness or Exit counseling is completed electronically.

• Direct PLUS Loan Request responses (message class: CRSP) – generated when a Direct

PLUS Loan Request is completed electronically.

• Credit Status responses (message class: CRCS) – generated when there is a change to

borrower’s credit requirements met status. For example: o When a credit appeal is initiated, approved or denied o When an endorser is approved for a loan

o When PLUS Credit Counseling is completed o When all credit requirements have been met

• Booking Notification responses (message class: CRBN) – generated when a loan “books”

(an MPN, an origination record, and the first actual disbursement are on file). A booking notification does not get sent for subsequent disbursements and adjustments.

• Payment to Servicer responses (message class: CRPS) – generated when a borrower

sends money to his or her servicer within 120 days of disbursement. The servicer treats this as a cancellation and a borrower may be eligible to receive the amount within the same academic year. The COD System will use the Payment to Servicer amounts when evaluating annual loan limits.

• Subsidized Usage responses (message class: CRSU) – generated when there is a change to

a loan’s subsidized usage values

• Origination Fee responses (message class: CROF) – generated when a change to the

Origination Fee, Interest Rebate Percentage and Disbursement Net, Fee and Rebate Amounts has been made by the COD System.

• Informed Borrower responses (message class: CRIB) – generated when a borrower

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The Department has a multi-servicer, borrower-centric approach to servicing federally-owned loans, including all Direct Loans. Currently, we do this through the assistance of several federal loan servicers. The servicers are:

• CornerStone

• ECSI Federal Perkins Loan Servicer (Federal Perkins Loans only) • FedLoan Servicing (PHEAA) • Granite State – GSMR

• Great Lakes Educational Loan Services, Inc. • HESC/Edfinancial • MOHELA • Navient • Nelnet • OSLA Servicing

Once the first actual disbursement is accepted by the COD System, the loan is considered “booked” and is assigned and sent to a federal loan servicer. At the same time, a booking notification is sent to the school confirming that the loan has booked. Subsequent disbursements and adjustments to the disbursements are also booked and sent to the same servicer. However, for subsequent

disbursements and adjustments, a booking notification does not get sent to the school. Once the loan is on the federal loan servicer’s system, the servicer sends information to the borrower about the servicing of his or her loan.

In addition to the student or parent Direct Loan borrower receiving correspondence from his or her federal loan servicer, the servicer will be identified on the National Student Loan Data System (NSLDS®) website. The NSLDS is a central database that contains information about all of the student loan programs funded by the Department. Both the student or parent borrower and the school will be able to view the servicer code and name associated with each loan.

A school will also be able to view the federal loan servicer code and name associated with each Direct Loan via the COD website. The school can access this information under the Person tab on the Website’s top menu bar by clicking on Servicer and then entering the Award ID or the Social Security Number (SSN). The servicer will be identified under Borrower-Servicer Relationship. The federal loan servicer information is also included on the Direct Loan SAS.

Direct Loan Spotlight

Table of Contents

Direct Loan

Spotlight

Webinar Housekeeping – Welcome!

• Turn your computer speaker volume up

• For technical assistance:

Review the Tech Tips

Contact us using the Q&A

Email webinars@nasfaa.org

• Download the handout

• Print your certificate of attendance

• Complete the survey

Introductions

• Lissa Powell

• Kochie Vaughan

• Eunice Powell

Today’s Topics

• COVID-19

• Eligibility When Grade Level or Enrollment

Status Changes

• Origination and Disbursement

• Loan Proration

• Annual Student Loan Acknowledgement

• Federal Direct PLUS Loan Program

• Grab Bag

Poll

COVID-19

COVID-19 and Interest Accrual

Will payments and interest be suspended on

parent PLUS Loans due to COVID-19?

• 0% interest rate applies to loans held by ED

Defaulted and nondefaulted Direct Loans

Defaulted and nondefaulted FFEL Program Loans

Defaulted and nondefaulted Federal Perkins Loans

Defaulted HEAL Loans

• March 13 – September 30

COVID-19 and PSLF

Will suspended payments count toward Public

Service Loan Forgiveness (PSLF)?

• Yes, if you work full-time for a qualifying

employer during the suspension (March 13 –

September 30)

COVID-19 and Loan Rehabilitation

Will loan payments that are suspended due to

coronavirus count toward loan rehabilitation?

• Yes

• Suspended payments count as if actual

payment was made

• Does not count toward satisfactory repayment

arrangements to clear a defaulted loan

COVID-19 and Loan Repayment

For borrowers who enter their grace period

during the suspension period, will their grace

period be extended?

• No, grace period would begin as normal

• Unless loans were scheduled to enter

repayment prior to September 30, suspension

period would not apply

COVID-19 and Cohort Default Rates

Due to Coronavirus, will ED extend the deadline

for cohort default rate appeals?

• Appeals for fiscal year 2017 CDRs extended

until June 30, 2020

• April 23, 2020 Electronic Announcement

• If deadline is further extended, NASFAA will

update the AskRegs Knowledgebase

Eligibility When Grade Level or

Enrollment Status Changes

Enrollment Status Changes

Scenario

• Crystal is second-year undergraduate

• Registered for 14 credit hours prior to fall term

• School disburses 10 days prior to start of payment

period

• Disbursed Direct Loan on August 18

• On August 20, Crystal dropped classes and is

only now scheduled to attend 4 credit hours

Do we have to return the loan funds since she is

now enrolled less than half time?

_{year student at our school}